INDIANAPOLIS, IN — On March 5th, Andrej Divis, Director, MHCV Forecasting, IHS-Markit and Steve Latin-Kasper, Director of Market Data and Research, NTEA, Presented an educational session at the 2019 Work Truck Show, "Work Truck Industry Overview and Outlook."
The session shared economic and market information intended to help fleet managers optimize business planning. The session included market trends and how they might be affected by U.S. and global economic cycles.
On the whole, the current outlook was positive--although every positive seemed to come with some caveats. Consumer confidence is good, although declining. Due to inflation there has not been much real increase in the overall standard of living. Consumers do have the cash and credit to spend, but they are just not in a mood to borrow.
Interest rates are low, historically, but keep in mind that millennials (who in the next two years are expected to make up 50 percent of the U.S. workforce) have basically grown up with those low interest rates. Any increase at all looks huge to this generation, which can again affect their decision-making when it comes to large purchases such as trucks.
The construction industry is still growing, although the rate of growth is declining. This is marked by trouble in the European segment, in particular uncertainty over the end results of Brexit.
Some potential future problems include the ongoing labor shortage, which is affecting the manufacturing, construction and trucking segments. Fueling the labor problem is the fact that the growth of the economy has produced only a small real growth in wages (again, due to inflation).
As bad as the labor problem is, it is projected to only get worse. 3.7 million Baby Boomers are retiring each year, and taking their training and experience with them. Some of that institutional knowledge will be irreplaceable.
Business debt is at a high level, and the federal government is currently running large deficits, both of which will affect new investment. Capital utilization is also high.
The overall business community is concerned by a high degree of political uncertainly. Political actions are being taken without businesses being given time to prepare, and without much thought to what their ultimate effects might be. Take, for example, the current trade war with China: it could last for years and deepen into a serious crisis; alternately it might just disappear next month.
Of particular concern to the work truck industry is the price of gas--money spent on gas is money that cannot be spent on new vehicles or accessories. Most estimates predict the price of oil will return to $70 a barrel, and few see the "sweetheart" prices of the last few years returning. This is predicted to be a drag on the industry at a time when most other commodities will be coming down in price. Driving the rise in prices will be massive numbers of new drivers in India and China.
However, prices probably will not rise either too steeply, or too unpredictably for fleet managers and operators to adjust to the changes.